Crazy Real Estate Model: Selling Your Home With No Listing Commission

There is sort of a new real estate brokerage model out there for selling your home – if you live in Philadelphia. The concept is that you can market your home for sale with a full service brokerage without having to pay any listing side commission (but you still have to pay a commission to the buy side obviously). Well, there is a $345 admin fee so it’s kind of like a flat fee MLS service but not exactly. So maybe it’s not so new after all. I need to explain.
The name of the company is Houwzer and they are a full service Philadelphia real estate brokerage startup that only charges $345 to cover their out of pocket costs in listing your home for sale, which is less than what most flat fee MLS services would charge. The odd thing about this model is that they are apparently a full service brokerage. Check out this page where they compare their approach to a flat fee MLS service and a traditional brokerage: How Selling Your Home Should Work.
The first question is why do they do this? Mike Maher, the co-founder and CEO explains their strategy in this interview with Disrupting The Residential Real Estate Brokerage Biz. Basically they believe they will make money on the buy side when they meet unrepresented buyers who inquire about the listings.
But it turns out that every traditional brokerage makes money from meeting unrepresented buyers. Meeting unrepresented buyers is one of the payoffs from having listings and that payoff is essential to cover the substantial overhead of being a real estate agent – primarily client acquisition costs and wasted time as I’ve written about before. And then there are the substantial costs of actually handling the listing and shepherding it through closing. A real estate agent just can’t afford to do that for free, though in the Philadelphia market, like in the Chicago suburbs, listing agents do not attend showings – properties are on lockboxes so that substantially reduces listing costs.
There is also a little concern about the incentives in an arrangement like this. When the home is being used as buyer bait what kind of incentive does the real estate brokerage actually have to sell it? Well, the same question could be asked about a realtor charging by the hour. Really the only incentive to keep the realtor honest is maintaining their reputation.
I’ve actually heard of brokerages trying Houwzer’s strategy before so it’s really not so new. Those other guys crashed and burned and I’m predicting these guys will crash and burn also. Did they create a financial model for this business? They just can’t meet enough buyers to pay for their listing expenses and cover their overhead. Most buyers interested in a home for sale will already have an agent and many of those that don’t might just decide to use another real estate brokerage that is offering a commission rebate. Houwzer will get cherry picked to death.
But don’t get me wrong. I think their service offering is a great deal for home sellers and people should be jumping all over their offer. If someone’s business model is to give away the store come and get your share while you can!
#Houwzer #realestate #dumbideas #homeselling
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